Five new gas contracts to contribute Rp 59t to state income

Five new contracts of oil and gas sale and purchase were signed on Wednesday (26th December 2012) at the office of the energy and mineral resources ministry.

?The state income from the five contracts is estimated to reach US$6.12 billion (around Rp 59 trillion),? the interim upstream authority SK MIGAS Chairman Jero Wacik, who is also energy and mineral resources minister, said when attending the signing ceremony on Wednesday.

The contracts signed consist of a head of agreement (HoA) of liquified natural gas (LNG) between state utility PT Perusahaan Listrik Negara (PLN) as the buyer and BP Berau Ltd as the seller, two extensions of sale and purchase agreements (SPA) of liquified petroleum gas (LPG) between PT Pertamina as the buyer and the production sharing contractors (PSC) in Jabung, Jambi and Kepala Burung in West Papua, sale and purchase agreement of natural gas between PT Pertamina EP as the seller and PT. Pembangkit Jawa-Bali as the buyer to supply the power plant Muara Tawar, and an amendment of oil sale contract from Cepu Block to PT Pertamina to supply its refinery plants.

Previously, SK MIGAS said that there would be six contracts to be signed today. But apparently, only five of them have realized. The other one, which is the sale and purchase agreement of LPG between the state oil and gas company PT Pertamina and the production sharing contractors (PSC) - Mahakam, Sanga-sanga, and Inpex Attaka is not signed yet. No further details are available regarding the cancellation.

Jero said that besides the state income, the agreements of the LNG supply from BP and additional natural gas supply from Pertamina will enable PLN to save on its energy cost by converting the use of oil fuels to gas as its primary energy. ?PLN will save about US$17.88 billion by converting the use of diesel fuels to gas,? he said.

According to him, the signing has shown that the government is committed to prioritizing the oil and gas supply for domestic need.

He cited the example of the agreement between BP and PLN to supply LNG through the floating storage and regasification unit (FSRU) in West Java at 23.96 million metric tons for 20 years from 2013. The gas agreement is expected to meet the gas need of power plants in Java and Sumatra, and at the same time to cut the power subsidy given through the state budget. ?Beginning in 2013, two cargoes will be sent and later it will be increased to 24 cargoes in 2019,? he added.

So are the agreements of LPG sale and purchase that will support the program of converting the use of kerosene to LPG.

One of the LPG contract is aimed to meet the LPG need in Sorong region, Papua.

Jero pointed out that the government had allocated the LPG for local market since 2008. ?Currently, about 50 percent of the national LPG production is allocated for the local need,? he added.

He noted that of the total oil lifting in 2012, about 65 percent will be allocated for local need.

Since 2006, gas supply for domestic market has also been prioritized. During the last eight years, the supply of natural gas for domestic need has increased by 250 percent. ?About 46 percent of the total gas allocated for local market is used to meet the need of power plants,? he added.

Editing by Benget Besalicto Tnb.